Housing auctions

Auctioning homes offers a clear trade-off between a speedy sale and the discomfort of potential informational asymmetries. In general, auctions are designed to yield superior prices due to the element of competition among bidders. However, in daily practice, housing auctions often fail the necessary conditions to result in this theoretical pricing process. There are important distinctions between foreclosure auctions and open-market auctions. In the first category, the motive of sale is a financial delinquency, which shifts the negotiation position during the sale towards the buyers. In open-market auctions, the seller simply relies on the auction as a sale platform in order to benefit from the expedience of the process and competition among multiple bidders. Key to the success of any housing auction is the level of organisation. A well-reputed auction organisation that generates large audiences with unrelated bidders and that disseminates all relevant information regarding the dwelling that is for sale will be able to generate a better price for sellers.

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